Provisions Of IBC Would Override Provisions Of Other Acts: Calcutta High Court Quashes Provisional Seizure Order Issued Under FEMA
The Petition before the Calcutta High Court was filed for quashing of notices issued under the Foreign Exchange Management Act, 1999 (FEMA).

While quashing a provisional seizure order as well as a notice issued under the Foreign Exchange Management Act, 1999 (FEMA), the Calcutta High Court has reiterated that the provisions of the IBC would override the provisions of other Acts like the FEMA.
The Petition before the High Court was filed for quashing of notices issued under the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
The Single Bench of Justice Jay Sengupta held, “As has been held by the Hon’ble Apex Court in a catena of decisions, the provisions of the IBC would override the provisions of other Acts like the FEMA. Section 238 is very strongly worded indeed.”
Advocate Jishnu Chowdhury represented the Peititoner while Advocate Arijit Chakraborti represented the Respondent ED.
Factual Background
The case as presented by the Petitioner was that the Corporate insolvency resolution process (CIRP) of Shree Ganesh Jewellery House (I) Pvt. Ltd. (Shree Ganesh) commenced on February 12, 2018 pursuant to an order being passed by the National Company Law Tribunal (NCLT) at Kolkata under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLT directed that Shree Ganesh should be liquidated as per the provisions of the IBC. Furthermore, the writ petitioner was appointed as the liquidator by the NCLT.
The Respondent ED had earlier issued a provisional order of attachment (POA) under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) in respect of the assets of Shree Ganesh, after the order of liquidation was passed. The writ petitioner received an order of seizure (Provisional Seizure Order), which was issued by the respondent under Section 37A of the Foreign Exchange Management Act, 1999 (FEMA) in respect of the assets of the company. The writ petitioner received a petition u/s 37A(2) of FEMA seeking confirmation of the Provisional Seizure Order directing him to personally appear in the proceedings (Notice). Accordingly, the writ petitioner filed the instant writ petition challenging the Provisional Seizure Order and the Notice.
Reasoning
The Bench explained that once an order for liquidation was passed, as in the instant case, Section 33(5) provides that subject to Section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by the liquidator on behalf of the corporate debtor with the prior approval of the Adjudicating Authority.
“As has rightly been contended on behalf of the petitioner, what was contemplated in a CIRP was the approval of a Resolution Plan. After liquidation order, the corporate debtor might be sold as a going concern or the assets might be sold. Therefore, once CIRP was admitted, the assets on corporate debtor could not be attached. They would be sold in CIRP or in liquidation”, it said while also adding, “Section 32A(2) of the IBC provides for more. According to it, no action will be taken against property of the corporate debtor in relation to any offence committed prior to the commencement of the CIRP. “
The bench referred to the judgment in Ramsarup Industries Limited and Others v. Union of India and Another wherein it has been held that the provisions of the IBC would override the provisions of the FEMA. Further reference was made to the judgment in Assistant Director, ED vs. Raj Kumar Ralhan (2019) where the NCLT held that moratorium declared under Section 14 of the IBC was applicable to proceedings under the FEMA. The Enforcement Directorate could not proceed against the corporate debtor as long as the moratorium under the IBC was in force.
The Bench thus quashed the impugned provisional seizure order and the impugned notices. “However, a proceeding can fairly be initiated against the erstwhile Director and the Officer of the corporate debtor, if they are found to be individually liable”, it said while allowing the appeal.
Cause Title: Anup Kumar Singh Vs Union of India & others. (Case No.: WPA 4585 of 2023)
Appearance:
Petitioner: Advocates Jishnu Chowdhury, Saptarshi Mondal
Respondent: Advocates Arijit Chakraborti, Deepak Sharma, Swati S